Table of Contents
Ultra Short Term Bond Funds
Ultra short term funds, earlier referred as Liquid Plus Funds, are funds that invest in debt instruments having residual maturities of more than 91 days and typically less than 1 year(in some cases they may go upto 1.5 years). Ultra Short Term Funds are short term investments that are highly suitable for investors who are willing to marginally increase the risk of investment to earn good returns. Essentially, Ultra short Funds invest in money market securities and other debt instruments of short maturities, however, the average portfolio maturity of these funds is generally little higher than that of Liquid Funds.
Also known as Cash or Treasury Management Funds, Ultra Short Term Funds generally offer good returns that other types of Debt fund (like Liquid Mutual Funds).
Ultra Short Term Bond Funds Features
Fund Type
Ultra-Short Term Funds are open-ended and the maturity period of funds varies from fund to fund. The maturity is very short(usually a couple of months) but longer than that of liquid funds. The investors can easily buy and sell the units of these funds as per the NAV (Net Asset Value) of the redemption day.
NAV of Ultra Short Term Funds
For Ultra Short Term Funds, the purchase happens on a (T+0) Basis. This means that the NAV is fixed on the same day as the funds reach the AMC. For e.g. for an investor purchasing the fund within the cut-off time on a Tuesday (and funds being realised), the NAV date applicable would be Tuesday itself.
Exit Load of Ultra Short Term Bond Funds
Some Ultra Short Term Funds may have exit loads on exits made within very short periods of time (ranging from 7 days to 1 month). The period till which exit load applies may vary with funds. However, some ultra short terms funds do not have any exit loads also.
Returns of Ultra Short Term Funds
The returns may be paid to the investors in the form of Dividends (in the case of Dividend Funds) or in terms of appreciation of the fund NAV (in the case of Growth funds).
Redemption Ultra Short Term Funds
In the case of redemption, the process is the same for both liquid funds and Ultra Short Term Funds. For all redemption requests received by the AMC within the cut-off time (3 PM), the proceeds are paid to the customer the next day i.e. on a (T+1) basis. Albeit, if the request gets registered after 3 PM, the investors shall receive the redemption amount day after.
Minimum Amount of Investment
The minimum of Investing in Ultra Short Term Funds is INR 5,000 to 10,000 (on the retail plans).
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Investment Avenues of Ultra Short Mutual Funds
Ultra Short Term Funds are fixed Income investments that invest in money market instruments like Treasury Bills but these may be 91-Day, 182-Day or 360-Day Treasury Bills. They can also invest in CDs and CPs having residual maturities longer than 91 days. Moreover, it is sometimes understood that there is no credit risk in such portfolios. However, this is not the case. Any short term investment like Ultra Short Funds can give a negative return as well if there is a Default. But, most companies delay payments on longer-dated Bonds before they start defaulting on short term debt (since this would lead a freeze in short term credit). Also, the investors need to carefully look at the portfolio in these funds to assess the quality of instruments and be ready to take that risk.
Why Invest in Best Ultra Short Term Funds?
Typically, the yield on a debt instrument is higher for instruments with longer maturities. Think of it as a way to reward the extra risk that investors take to be invested in the instruments for a longer period of time. In finance, this is called the liquidity premium Theory. Thus, securities in Ultra Short Mutual Funds usually earn a higher yield as compared to Liquid funds (albeit at a relatively higher risk). As a result, Ultra Short Term Funds may give marginally better returns than Liquid funds over comparable periods of time. So, make a sensible short-term investment in Mutual Funds by investing in Best Ultra Short term Mutual Funds to earn good returns with less volatility.
Taxation of Ultra Short Term Funds
In the below table, the returns of Ultra Short Bond Funds received in the form of a dividend are tax-free in the hands of investors.
However, a Dividend Distribution Tax (DDT) is deducted at the source by fund houses, which is 25% in case of Debt Funds like Ultra Short Term Funds.
| Liquid Funds | Liquid Funds | Ultra Short Funds | Ultra Short Funds | |
|---|---|---|---|---|
| Class of Investors | Individuals/HUF | Corporate | Individuals/HUF | Corporate |
| Dividend Distribution Tax | 27.038% | 32.445% | 13. 519% | 32.445% |
| Short Term Capital Gains | As per income tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates |
(Please note, investors are advised to consult their Tax consultant before taking any decisions)
Best Performing Ultra Short Debt Funds to Invest FY 21 - 22
Below is the list of top funds have net assets over 100 Crore and managing assets for atleast 3 years.
Fund NAV Net Assets (Cr) 1 MO (%) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) Nippon India Ultra Short Duration Fund Growth ₹3,197.25
↑ 0.30 ₹1,238 2.8 4.6 5.9 9.5 5.1 5.5 Franklin India Ultra Short Bond Fund - Super Institutional Plan Growth ₹30.6449
↑ 0.02 ₹2,104 1 2 4.5 8.4 7.5 7.9 ICICI Prudential Ultra Short Term Fund Growth ₹21.8696
↑ 0.00 ₹10,338 0.4 1.1 2.2 4.8 7 7.2 Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 28 Jul 21
(Erstwhile Reliance Liquid Fund - Cash Plan) The investment objective of the Scheme is to generate optimal returns consistent with moderate levels of risk and high liquidity. Accordingly, investments shall predominantly be made in Debt and Money Market Instruments. Nippon India Ultra Short Duration Fund is a Debt - Ultrashort Bond fund was launched on 7 Dec 01. It is a fund with Low risk and has given a Below is the key information for Nippon India Ultra Short Duration Fund Returns up to 1 year are on To provide a combination of regular income and high liquidity by investing primarily in a mix of short term debt and money market instruments. Franklin India Ultra Short Bond Fund - Super Institutional Plan is a Debt - Ultrashort Bond fund was launched on 18 Dec 07. It is a fund with Moderate risk and has given a Below is the key information for Franklin India Ultra Short Bond Fund - Super Institutional Plan Returns up to 1 year are on (Erstwhile ICICI Prudential Regular Income Fund) The fund’s objective is to generate regular income through investments primarily in debt and money market instruments. As a secondary objective, the Scheme also seeks to generate long term capital appreciation from the portion of equity investments under the Scheme. ICICI Prudential Ultra Short Term Fund is a Debt - Ultrashort Bond fund was launched on 3 May 11. It is a fund with Moderate risk and has given a Below is the key information for ICICI Prudential Ultra Short Term Fund Returns up to 1 year are on 1. Nippon India Ultra Short Duration Fund
CAGR/Annualized return of 6.1% since its launch. Ranked 62 in Ultrashort Bond category. Return for 2020 was 4.9% , 2019 was 0.9% and 2018 was 7.3% . Nippon India Ultra Short Duration Fund
Growth Launch Date 7 Dec 01 NAV (28 Jul 21) ₹3,197.25 ↑ 0.30 (0.01 %) Net Assets (Cr) ₹1,238 on 30 Jun 21 Category Debt - Ultrashort Bond AMC Nippon Life Asset Management Ltd. Rating ☆☆ Risk Low Expense Ratio 1.09 Sharpe Ratio 1.08 Information Ratio 0 Alpha Ratio 0 Min Investment 100 Min SIP Investment 100 Exit Load NIL Yield to Maturity 5.32% Effective Maturity 6 Months 27 Days Modified Duration 5 Months 5 Days Growth of 10,000 investment over the years.
Date Value 30 Jun 16 ₹10,000 30 Jun 17 ₹10,597 30 Jun 18 ₹11,253 30 Jun 19 ₹11,866 30 Jun 20 ₹12,098 30 Jun 21 ₹12,778 Returns for Nippon India Ultra Short Duration Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 28 Jul 21 Duration Returns 1 Month 2.8% 3 Month 4.6% 6 Month 5.9% 1 Year 9.5% 3 Year 5.1% 5 Year 5.5% 10 Year 15 Year Since launch 6.1% Historical performance (Yearly) on absolute basis
Year Returns 2020 4.9% 2019 0.9% 2018 7.3% 2017 5.8% 2016 6.8% 2015 7.6% 2014 8.4% 2013 8.5% 2012 9.2% 2011 9% Fund Manager information for Nippon India Ultra Short Duration Fund
Name Since Tenure Vivek Sharma 1 Oct 13 7.75 Yr. Kinjal Desai 25 May 18 3.1 Yr. Data below for Nippon India Ultra Short Duration Fund as on 30 Jun 21
Asset Allocation
Asset Class Value Cash 38.2% Debt 61.8% Debt Sector Allocation
Sector Value Corporate 41.4% Cash Equivalent 34.26% Government 20.3% Securitized 4.04% Credit Quality
Rating Value A 3.46% AA 24.67% AAA 71.86% Top Securities Holdings / Portfolio
Name Holding Value Quantity 8.35% Govt Stock 2022
Sovereign Bonds | -8% ₹104 Cr 10,000,000
↑ 10,000,000 182 DTB 02122021
Sovereign Bonds | -8% ₹98 Cr 10,000,000
↑ 10,000,000 Piramal Capital & Housing Finance Limited
Debentures | -4% ₹55 Cr 675
↑ 675 Mobil Trust Series 19
Unlisted bonds | -4% ₹50 Cr 500,000,000
↑ 500,000,000 182 DTB 25112021
Sovereign Bonds | -4% ₹49 Cr 5,000,000
↑ 5,000,000 India Grid Trust
Debentures | -4% ₹48 Cr 400
↑ 400 Shriram Transport Finance Company Limited
Debentures | -4% ₹45 Cr 450
↑ 450 Bajaj Housing Finance Limited
Debentures | -3% ₹41 Cr 400
↑ 400 Indinfravit Trust
Debentures | -3% ₹40 Cr 400
↑ 400 Ahmedabad-Maliya Tollway Limited
Debentures | -3% ₹38 Cr 380
↑ 380 2. Franklin India Ultra Short Bond Fund - Super Institutional Plan
CAGR/Annualized return of 8.6% since its launch. Return for 2020 was 4% , 2019 was 9.6% and 2018 was 8.7% . Franklin India Ultra Short Bond Fund - Super Institutional Plan
Growth Launch Date 18 Dec 07 NAV (28 Jul 21) ₹30.6449 ↑ 0.02 (0.06 %) Net Assets (Cr) ₹2,104 on 30 Jun 21 Category Debt - Ultrashort Bond AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd Rating ☆ Risk Moderate Expense Ratio 0.52 Sharpe Ratio 2.95 Information Ratio 0 Alpha Ratio 0 Min Investment 10,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 0% Effective Maturity 6 Months 19 Days Modified Duration Growth of 10,000 investment over the years.
Date Value 30 Jun 16 ₹10,000 30 Jun 17 ₹10,936 30 Jun 18 ₹11,774 30 Jun 19 ₹12,901 30 Jun 20 ₹13,495 30 Jun 21 ₹14,610
Purchase not allowed Returns for Franklin India Ultra Short Bond Fund - Super Institutional Plan
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 28 Jul 21 Duration Returns 1 Month 1% 3 Month 2% 6 Month 4.5% 1 Year 8.4% 3 Year 7.5% 5 Year 7.9% 10 Year 15 Year Since launch 8.6% Historical performance (Yearly) on absolute basis
Year Returns 2020 4% 2019 9.6% 2018 8.7% 2017 8.2% 2016 9.7% 2015 9.7% 2014 10% 2013 10% 2012 10.3% 2011 9.4% Fund Manager information for Franklin India Ultra Short Bond Fund - Super Institutional Plan
Name Since Tenure Santosh Kamath 25 Oct 18 2.68 Yr. Pallab Roy 1 Jun 08 13.09 Yr. Data below for Franklin India Ultra Short Bond Fund - Super Institutional Plan as on 30 Jun 21
Asset Allocation
Asset Class Value Cash 49.67% Debt 50.33% Debt Sector Allocation
Sector Value Corporate 50.33% Cash Equivalent 49.67% Credit Quality
Rating Value A 57.08% AA 42.76% AAA 0.16% Top Securities Holdings / Portfolio
Name Holding Value Quantity SBI Overnight Fund Dir Gr
Investment Fund | -34% ₹716 Cr 2,120,378
↑ 289,887 Edelweiss Commodities Services Limited
Debentures | -17% ₹359 Cr 3,650
↑ 3,650 Clix Capital Services Private Limited
Debentures | -11% ₹224 Cr 2,350
↑ 2,350 PNB Housing Finance Limited
Debentures | -9% ₹191 Cr 1,910
↑ 1,910 Clix Capital Services Private Limited
Debentures | -9% ₹191 Cr 2,000
↑ 2,000 Clix Finance India Private Limited
Debentures | -5% ₹100 Cr 1,000
↑ 1,000 Clix Capital Services Private Limited
Debentures | -5% ₹100 Cr 1,000
↑ 1,000 Clix Capital Services Private Limited
Debentures | -4% ₹90 Cr 900
↑ 900 U.P. Power Corporation Limited
Debentures | -3% ₹71 Cr 938
↑ 938 Hinduja Leyland Finance Limited
Debentures | -1% ₹28 Cr 280
↑ 280 3. ICICI Prudential Ultra Short Term Fund
CAGR/Annualized return of 7.9% since its launch. Ranked 27 in Ultrashort Bond category. Return for 2020 was 6.5% , 2019 was 8.4% and 2018 was 7.5% . ICICI Prudential Ultra Short Term Fund
Growth Launch Date 3 May 11 NAV (28 Jul 21) ₹21.8696 ↑ 0.00 (0.01 %) Net Assets (Cr) ₹10,338 on 30 Jun 21 Category Debt - Ultrashort Bond AMC ICICI Prudential Asset Management Company Limited Rating ☆☆☆ Risk Moderate Expense Ratio 0.96 Sharpe Ratio 3.53 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load 0-1 Months (0.5%),1 Months and above(NIL) Yield to Maturity 4.72% Effective Maturity 6 Months Modified Duration 4 Months 24 Days Growth of 10,000 investment over the years.
Date Value 30 Jun 16 ₹10,000 30 Jun 17 ₹10,907 30 Jun 18 ₹11,612 30 Jun 19 ₹12,571 30 Jun 20 ₹13,559 30 Jun 21 ₹14,240 Returns for ICICI Prudential Ultra Short Term Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 28 Jul 21 Duration Returns 1 Month 0.4% 3 Month 1.1% 6 Month 2.2% 1 Year 4.8% 3 Year 7% 5 Year 7.2% 10 Year 15 Year Since launch 7.9% Historical performance (Yearly) on absolute basis
Year Returns 2020 6.5% 2019 8.4% 2018 7.5% 2017 6.9% 2016 9.8% 2015 9.1% 2014 14.8% 2013 3.1% 2012 9.4% 2011 Fund Manager information for ICICI Prudential Ultra Short Term Fund
Name Since Tenure Manish Banthia 15 Nov 16 4.62 Yr. Ritesh Lunawat 15 Jun 17 4.04 Yr. Data below for ICICI Prudential Ultra Short Term Fund as on 30 Jun 21
Asset Allocation
Asset Class Value Cash 49.41% Debt 50.59% Debt Sector Allocation
Sector Value Corporate 42.93% Cash Equivalent 42.47% Government 14.6% Credit Quality
Rating Value A 2.29% AA 31.49% AAA 66.23% Top Securities Holdings / Portfolio
Name Holding Value Quantity 182 DTB 19082021
Sovereign Bonds | -6% ₹622 Cr 62,500,000
↑ 62,500,000 182 DTB 09122021
Sovereign Bonds | -5% ₹492 Cr 50,000,000
↑ 50,000,000 182 DTB 16122021
Sovereign Bonds | -5% ₹492 Cr 50,000,000
↑ 50,000,000 Embassy Office Parks Reit
Debentures | -3% ₹356 Cr 2,887
↑ 2,887 182 DTB 23122021
Sovereign Bonds | -3% ₹295 Cr 30,000,000
↑ 30,000,000 Talwandi Sabo Power Limited
Debentures | -2% ₹237 Cr 2,362
↑ 2,362 The Tata Power Company Limited
Debentures | -2% ₹221 Cr 2,084
↑ 2,084 Housing Development Finance Corporation Limited
Debentures | -2% ₹215 Cr 2,130
↑ 2,130 Reliance Ports and Terminals Limited
Debentures | -2% ₹204 Cr 2,019
↑ 2,019 Manappuram Finance Limited
Debentures | -2% ₹203 Cr 2,000
↑ 2,000
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